Last checked at 8 Sep 2009 07:00
| For immediate release | 8 September 2009 |
Advanced Medical Solutions Group plc
("AMS" or the "Group")
Interim Results for the six months ended 30 June 2009
Winsford, UK: Advanced Medical Solutions Group plc (AIM: AMS), the global medical technology company, today announces its interim results for the six months ended 30 June 2009.
Business Highlights
Good progress made in positioning Group to exploit significant growth opportunities: - Initial 510(k) clearance for sale of LiquiBand® Topical Skin Adhesive into US market received in February 2009 - Partnership agreement with Stryker Corporation for distribution of LiquiBand® products in cranio-maxillofacial surgery signed in July 2009 - 510(k) clearance for sale of silver polyurethane anti-bacterial foam dressings into US market received in August 2009
Construction and fit out of new headquarters and manufacturing facility in Winsford on budget and on schedule to open in 2010
Challenging global economic conditions have impacted short term demand from marketing and distribution partners in the first half
Financial Highlights
Group revenue maintained at £9.9 million (H1 2008: £9.8 million) despite customer destocking. Revenue decreased 4% to £9.4 million at constant currency(i)
Gross margin improved to 49% (H1 2008: 47%) due to favourable currency effect. Underlying gross margin decreased by 0.5 percentage points
Profit from operations (pre-exceptional items) of £0.9 million (H1 2008: £1.0 million). Loss from operations post-exceptional items (ii) of £0.1 million
Basic earnings per share (pre-exceptional items) of 0.64p (H1 2008: 0.91p). Loss per share post-exceptional items(ii) of 0.02p
Net funds of £4.2 million at 30 June 2009 (H1 2008: £5.4 million) after continued investment for future growth
(i) Constant currency removes the effect of currency movements by re-translating the current year's performance at the previous year's exchange rates.(ii) Exceptional costs of £0.8 million were incurred on an aborted acquisition and £0.2 million related to the new Winsford facility. See Note 7.
Commenting on the results Dr. Geoffrey Vernon, Chairman of Advanced Medical Solutions, said:
"AMS made good progress in positioning itself to exploit significant growth opportunities in its core markets and achieved a solid financial performance, despite the challenging global economic conditions impacting demand from our marketing and distribution partners in the first half of the year.
"Given the current order book visibility and planned product launches, the Board remains confident in the full year outlook with the business trading in line with current expectations for 2009.
"With the strategic investments the Group has made and the regulatory approvals received, the longer term outlook for the business continues to be very positive."
For further information, please contact:
| Advanced Medical Solutions Group plc | |
| Don Evans, Chief Executive Officer Mary Tavener, Finance Director www.admedsol.com | Tel: +44 (0) 1606 545508 |
| Buchanan Communications | |
| Mark Court / Stasa Filiplic | Tel: +44 (0) 20 7466 5000 |
| Investec Bank plc | Tel: +44 (0) 20 7597 5970 |
| Tim Pratelli / Daniel Adams |
Notes to Editors:
Advanced Medical Solutions develops and manufactures products for the $15 billion global woundcare market.
Founded in 1991 and quoted on AIM, Advanced Medical Solutions is focused on the design, development and manufacture of innovative products for advanced woundcare and wound closure.
The advanced woundcare products are based on the moist wound healing principle. AMS uses its in-house technology to provide a vertically integrated 'one stop shop' for all categories of moist wound healing products. The Company has the capability to move a product from design and development through to production and delivery for distribution and sale into customer markets.
The acquisition of a 49.4% stake in Corpura BV in May 2008 strengthened AMS's position in hydrophilic polyurethane foam - the largest and fastest growing segment of the advanced woundcare market.
AMS' technology in cyanoacrylate based tissue adhesives is used for the closure of small cuts and trauma wounds through to large surgical incisions, and also for protecting or sealing skin to prevent breakdown or infection.
AMS' products which currently serve the majority of the key global markets are sold either direct or through strategic partners and distributors.
Cautionary Statement
This Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.
The IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
CHAIRMAN'S STATEMENT
Overview
AMS made good progress in positioning itself to exploit significant growth opportunities in its core markets and achieved a solid financial performance, despite the challenging global economic conditions which have impacted demand from our marketing and distribution partners in the first half of the year.
Group revenue at £9.9 million (H1 2008: £9.8 million) was similar to prior year, with gross margin improved from 47% to 49% due to a favourable currency effect. On a constant currency basis, Group revenue declined 4% and gross margin reduced 0.5 percentage points.
Continued investment in sales and marketing to support key product and market entry opportunities has resulted in profit from operations (before exceptional items) of £0.9 million for the half year (H1 2008: £1.0 million). Loss from operations (post exceptional items) was £0.1 million).
The Group's cash position has enabled it to continue to invest for future growth with net funds at 30 June 2009 of £4.2 million (H1 2008: £5.4 million).
Regulatory approvals by the Food and Drug Administration (FDA) have opened up exciting new opportunities for commercialisation of the Group's technologies in the US market.
In February, the Group received its first 510(k) regulatory clearance for LiquiBand® and has further LiquiBand® products under review by the FDA. In July, the Group signed a global partnership with Stryker Corporation (Stryker) for global marketing and distribution of its LiquiBand® products for use in cranio-maxillofacial (CMF) surgical procedures.
In August, the Group received 510(k) clearance for a silver polyurethane foam dressing and is seeking a suitable partner to commercialise this product.
Construction and fit out of the new headquarters and manufacturing facility at Winsford is well- advanced and continues within budget and on schedule to open in 2010.
Operating Review
Advanced Woundcare
Advanced Woundcare sales of £8 million were similar to prior year (H1 2008: £8 million) with good growth in Europe, excluding UK, and in Rest of World offsetting reduced demand in the UK and US due to destocking by key partners and end user healthcare providers. The year-on-year comparison was also adversely affected by customers' stocking orders in H1 2008 for a number of silver alginate launches.
The silver alginate market, currently estimated at around $350 million, continues to expand at around 15% and AMS remains well positioned to exploit this segment with two silver technologies commercialised with a range of partners covering the key global markets.
Complementing the use of its newer technologies such as silver dressings for treatment of infected wounds, AMS's ActivHeal® value proposition remains attractive to NHS Trusts, particularly during times of budget constraints. Used as a first line therapy for routine wounds, ActivHeal® offers the NHS substantial savings and, following inclusion in the latest framework supply agreement last year, these products are now used in around half of the NHS Foundation and Acute Hospital Trusts in the UK. ActivHeal® sales in the first half were up 8% compared with prior year.
Wound Closure and Sealants
Wound Closure and Sealants sales of £1.9 million increased 3% over prior year (H1 2008: £1.8 million). Continued good progress was made in penetrating the European wound closure market with LiquiBand® tissue adhesive and a particularly strong presence has been built in the Emergency Room (ER) for the use of topical adhesives for the closure of minor trauma wounds. A comprehensive range of tissue adhesive products is now available throughout Europe sold under the Group's LiquiBand® Optima brand direct in the UK and via distributors in the rest of Europe. As well as the ER products, the range contains specific adhesives and applicators for closing small and large surgical wounds in the Operating Room (OR).
Given that the US constitutes the major part of the $200 million worldwide market for topical tissue adhesives, regulatory approval for sale of the LiquiBand® range in this territory remains a priority and this has progressed during the period.
Following re-classification of topical tissue adhesives from Class III to Class II by the FDA in May 2008, 510(k) submissions covering the range have been prepared and submitted and are currently under review.
In February 2009 clearance was obtained for an initial product based on the adhesive used routinely in the ER in Europe. Commercial arrangements for the introduction during 2009 via marketing and distribution partners of this product, and other products still under review aimed at the larger OR market opportunity, are well advanced.
Given the broad application for the current and future LiquiBand® product portfolio, we believe that the optimal commercialisation strategy is via multiple partners with specific competencies and experience.
In July 2009 the Group announced a global partnership with the Stryker Corporation (Stryker) for global marketing and distribution of its LiquiBand® products for use in cranio-maxillofacial (CMF) surgical procedures.
Stryker is one of the largest players in the $35.6 billion worldwide orthopaedic market with products sold in more than 120 countries. The CMF segment represents $900 million of this market with Stryker being globally recognised as the leader in this specialist field which involves surgical procedures resulting from fracture repair and deformity correction in the head and face.
Under the terms of the agreement, Stryker will have exclusive marketing and distribution rights for predominantly all geographical markets for CMF, with product launches to the European market, where the products are approved, having commenced in July and a phased roll out in the rest of the world following thereafter. Sales by Stryker into the US CMF market are expected to commence later this year following FDA clearance of the relevant products in the LiquiBand® range which are currently under review.
The Group's InteguSeal* Surgical Skin Sealant product continues to attract significant attention.
Surgical site infections (SSIs) are a major source of concern to surgeons and healthcare providers worldwide.
Our marketing and distribution partner Kimberly-Clark is conducting a major multi-centre clinical evaluation that is expected to be concluded and submitted for publication by the end of 2009. In the meantime, independent studies are starting to demonstrate the effectiveness of InteguSeal* in reducing SSIs and in saving lives. Clinical evidence showing a statistically significant reduction in SSIs through the use of our InteguSeal* product will open up a major growth opportunity for AMS in the surgical arena.
In May 2009 AMS announced that in two clinical papers presented at a meeting of the European Society of Cardiovascular Surgery (ESCVS) in Warsaw, Poland, InteguSeal* microbial sealant was shown to significantly reduce surgical site infection after cardiac surgery.
In the first study involving 291 patients, the authors concluded that the use of InteguSeal*, in addition to standard pre-operative preparation, provides a statistically significant reduction in the risk of SSIs in high risk patients undergoing cardiac surgery. The clinical end point showed a decrease of SSIs in the InteguSeal* group to 2.5% compared with the control group of 7.6%.
In the second study involving 684 cardiac patients, the prevalence of SSIs was reduced from 4.18% to 1.6% and mortality due to SSIs reduced from 35.3% to zero with the use of InteguSeal*.
Investments for Growth
Research and Development
The Group has continued to invest in a strategically aligned and focused R & D programme to deliver future profitable growth, with a total R & D spend of 9% (H1 2008: 10%) of sales in the half-year.
A significant part of this expenditure has been incurred as part of obtaining regulatory approvals for the Group's products in key markets.
As well as the activity to obtain clearance for LiquiBand® in the US, a number of silver dressing products are in development and undergoing regulatory approval.
In August 2009 the Group announced that it had received 510(k) clearance from the FDA to market its newly developed silver polyurethane (PU) anti-bacterial foam dressings in the US.
AMS developed the dressings by combining silver, which is widely recognised as a safe and effective anti-microbial agent, with foam from Corpura B.V., a Dutch based polyurethane foam manufacturer, in which AMS acquired a 49.4% interest in May 2008. Foam is one of the largest and fastest growing segments of the $3.2 billion advanced woundcare market and is an ideal material for the treatment of medium to high exudate chronic wounds. This 510(k) approval builds upon other approvals AMS has for products that include silver.
These silver PU anti-bacterial foam dressings have gained 510(k) clearance for the management of light to moderate exuding, partial to full thickness wounds including pressure sores, diabetic ulcers, leg ulcers, graft and donor sites, lacerations and abrasions, first and second degree burns, trauma wounds and post-operative surgical wounds.
AMS is working to identify a suitable partner to commercialise the launch of these products in the US. Approval for these products will take longer in Europe than in the US and the full benefits of commercialisation will be realised when European approval has been obtained.
A number of new technologies with the potential to accelerate wound healing have been assessed from a technical perspective. Commercial discussions for accessing suitable candidates for incorporation into AMS woundcare materials and progressing through development and regulatory programmes are underway.
Good progress has been made in developing an implantable adhesive for the fixation of surgical materials via a laparoscopic procedure. Initial clinical studies are expected to commence in Q2 2010. This project will allow initial entry into the internal adhesives and sealants market, estimated at around $600 million per year.
New Premises
In July 2008, AMS announced that it had agreed a pre-let for the lease of a 138,500 sq ft bespoke building in Winsford, Cheshire, for development into a new facility comprising offices,
R & D laboratories, manufacturing and warehousing. This facility, which will allow rationalisation of AMS's two existing facilities in Winsford into the new building during 2009 and 2010, will create additional capacity to support future growth, ensure continued compliance with the ever increasing quality demands from regulatory agencies and deliver efficiency gains when fully operational.
The construction of the external shell has been completed and handed over to AMS and the internal fit out of manufacturing clean rooms, laboratories, offices and warehouse is well advanced. Migration of the first of the two existing facilities is on schedule to start during Q4 2009. The overall project remains within budget with all the major costs identified and locked into contracts and on schedule to open in 2010.
Licensing and Acquisitions
The Group has continued to look at suitable licensing and acquisition opportunities to expand the business and accelerate growth.
The two principal areas that the Board has been considering are new material technologies that can leverage existing distribution outlets and opportunities that will broaden the Group's direct sales presence, a particular area of interest being to gain entry into the surgical/OR arena for the wound closure range of products.
One potential acquisition opportunity was seriously considered during Q1 2009 with the Group entering into exclusivity and conducting significant due diligence. In the market conditions prevailing at the time, acceptable terms could not be agreed and discussions were aborted.
The joint venture under which AMS acquired an interest in Corpura B.V., is progressing well and starting to deliver the strategic rationale behind this investment whereby the Group is looking to utilise PU foam as a platform technology for incorporating additives as part of its R & D programme.
The recent 510(k) approval for silver polyurethane foam underlines this approach.
Financial Review
Summary
The first six months of 2009 have proved challenging for the Company. Whilst the healthcare sector is relatively resilient to the economic downturn, the Group has been affected to a certain degree with most partners choosing to manage working capital more tightly. The US, in particular, has been significantly affected.
Against this background, Group revenue for H1 2009 was maintained at £9.9 million (H1 2008: £9.8 million) and was down 4% at constant currency.
The Group incurred £0.9 million of exceptional costs as a result of an aborted acquisition and as a result of the rationalisation of its existing sites in Winsford, into a new headquarters and manufacturing facility also based in Winsford. These are identified as administration costs and are discussed in more detail below.
Profit from operations and before exceptional items was £0.9 million (H1 2008: £1.0 million), 14% less than last year. The loss from operations after exceptional items was £0.1 million.
Fully diluted earnings per share before exceptional items was 0.60p (H1 2008: 0.85p). The fully diluted loss per share after exceptional items was 0.02p.
Revenue
Advanced woundcare sales were £8.0 million (H1 2008: £8.0 million). In general, partners chose to manage their working capital more tightly and to carry lower levels of inventory. One partner took a very robust view of reducing its inventory levels, which significantly impacted Q2 results. This particularly affected sales of silver alginate. This destocking effect appears to have worked through and ordering patterns are now more regular. As a result of this destocking, silver alginate sales were at a similar level to H1 2008.
Sales of ActivHeal® into the NHS grew 8% compared with last year.
Wound Closure and Sealant sales grew 3% to £1.9 million (H1 2008: £1.8 million). Growth was seen in Europe through sales to distributors but this was offset by a reduced level of InteguSeal* sales compared with the previous half year.
Geographically, the Group saw strong growth in Europe, excluding UK, which was 21% ahead of H1 2008 at £4.5 million (H1 2008: £3.7 million). Sales in the UK were £2.8 million, 20% less than prior year, mainly as a result of partner destocking as discussed earlier. Sales into the US were £2.3 million, 6% less than H1 2008. This reported figure includes the benefit of the stronger dollar and on a comparable dollar basis to last year, sales would have been 24% less than H1 2008. While some of the Group's US partners are continuing to perform well in the current economic climate, others have been affected by State medical budgets being curtailed, and were unable to order products in H1 2009.
Gross margin increased to 49%, a 2 percentage point improvement compared with H1 2008, however, adjusting for currency, gross margin declined slightly by 0.5 percentage points reflecting the effect of partners destocking and the lower level of sales of silver alginate.
Administration costs before exceptional items were at a similar level to H1 2008 with investments made in sales and marketing offset by benefits due to favourable foreign exchange.
The Group announced in July 2008 that it had agreed a pre-let for a lease of a new building in Winsford allowing construction of a new headquarters and manufacturing facility. The final lease was agreed in July 2009. This project is well advanced and continues to operate within budget and on time. Costs specifically associated with the project in the period amounted to £186,000 and have been identified separately and are shown as exceptional items. As previously disclosed £1 million of exceptional costs have been budgeted for both 2009 and for 2010 related to the new facility. These cover rent, additional staff dedicated to the project and transfer and re-validation of manufacturing equipment.
The Group had been pursuing an acquisition opportunity during Q1 2009 that had reached an advanced stage of discussion. Unfortunately, terms agreeable to both parties could not be agreed and on 9 April 2009 at the end of the exclusivity period, talks were formally terminated necessitating announcement by the Board. The costs involved in respect of this aborted transaction amounted to £763,000 and are also identified as exceptional items within administration costs.
Other income, which results from fees paid by partners for the development of new product, was at a lower level than the prior year. Development projects are being worked on but the timing of these was such that no significant revenue could be booked in H1 2009.
The Group's joint venture, Corpura B.V. made a small loss in H1 2009 (H1 2008: nil). It too was affected by destocking in the earlier part of the year.
Net interest was £7,000 in H1 2009 due to the low level of interest rates and lower average net funds compared with the prior year. The Group has recognised a tax credit of £29,000 resulting from the increase in the deferred tax asset.
Profit after tax but before exceptional items for the period was £0.9 million (H1 2008: £1.3 million). On this basis basic earnings per share was 0.64p (H1 2008: 0.91p) and fully diluted earnings per share was 0.60p (H1 2008: 0.85p).
The Group loss after exceptional items was £24,000 (H1 2008: £1.3 million), resulting in a fully diluted loss per share of 0.02p.
Cash outflow from operating activities in the first six months was £1 million (2008 H1: £0.5 million inflow). However, this included £0.9 million of exceptional costs and hence the pre-exceptional items cash outflow was £0.1 million. There was an increase in working capital of £1.5 million in the period. Inventory increased by £0.4 million, in line with the planned phasing of the site move. Trade and other receivables reduced by £0.2 million in the period. Debtor days were 54 at the end of June compared with 53 at the end of 2008. There were no bad debts in the period.
Trade and other payables decreased £1.2 million in the period. £0.6 million of this reflected the movement of marking to market currency contracts in place at the end of the period, which was recorded within administration expense. Overall, there was a net benefit of around £0.1 million due to foreign exchange in administration costs for the period.
The Group has started the investment in the new facility and spent £2.0 million in the period. The majority of this spend is related to the internal fit out of the building, which is in line with the £4.6 million budgeted capital expenditure for this for the full year 2009 as previously disclosed.
At 30 June 2009 the Group had net funds of £4.2 million (30 June 2008: £5.4 million).
The Group entered into a 3 year Revolving Credit Facility with Lloyds Bank for £5 million including a £1 million overdraft facility at market rate in August 2009. The Group considered this to be prudent financial planning and allows greater flexibility in funding the growth of the business. As a consequence of this, the Group's going concern position has been strengthened as more fully described in Note 12. Looking at the Group's commitments in 2010, the facility is likely to be partially used next year but is not forecast to be fully utilised at any point over the next 3 years.
Outlook
The destocking effect which led to reduced demand from a number of major partners during the first half-year has had a significant impact on the timing of our sales and, as announced in the AGM trading update in June 2009, we expect this will result in full year sales showing a higher than normal weighting to the second half.
The impact of this destocking has worked through and ordering patterns are now more regular. Given the current order book visibility and planned product launches, the Board remains confident in the full year outlook with the business trading in line with current expectations for 2009.
With the strategic investments the Group has made and the regulatory approvals received, the longer term outlook for the business continues to be very positive.
Dr. Geoffrey N. Vernon
Chairman
8 September 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
| (Unaudited) | ||||||
| Six months ended 30 June 2009 | (Unaudited) | |||||
| Before | Exceptional | Six months | (Audited) | |||
| exceptional | items | ended | year ended | |||
| items | (see note 7) | Total | 30 June 2008 | 31 December 2008 | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenue from continuing operations | 5 | 9,878 | - | 9,878 | 9,844 | 20,316 |
| Cost of sales | (5,079) | - | (5,079) | (5,239) | (10,562) | |
| Gross profit | 4,799 | - | 4,799 | 4,605 | 9,754 | |
| Distribution costs | (78) | - | (78) | (75) | (160) | |
| Administration costs | (3,814) | (949) | (4,763) | (3,849) | (7,666) | |
| Profit on disposal of property, plant & equipment | - | - | - | 10 | 35 | |
| Other income | 50 | - | 50 | 339 | 656 | |
| Share of result of joint venture | (68) | - | (68) | - | 80 | |
| Profit/(loss) from operations | 889 | (949) | (60) | 1,030 | 2,699 | |
| Finance income | 21 | - | 21 | 181 | 265 | |
| Finance costs | (14) | - | (14) | (16) | (37) | |
| Profit /(loss) before taxation | 896 | (949) | (53) | 1,195 | 2,927 | |
| Income tax | 8 | 29 | - | 29 | 111 | 382 |
| Profit /(loss) for the period attributable to equity holders of the parent | 925 | (949) | (24) | 1,306 | 3,309 | |
| Earnings /(loss) per share | ||||||
| Basic | 4 | 0.64p | (0.66p) | (0.02)p | 0.91p | 2.31p |
| Diluted | 4 | 0.60p | (0.62p) | (0.02)p | 0.85p | 2.16p |
CONDENSED CONSOLIDATED BALANCE SHEET
| (Unaudited) | (Unaudited) | (Audited) | ||
| 30 June 2009 | 30 June 2008 | 31 December 2008 | ||
| £'000 | £'000 | £'000 | ||
| Assets | ||||
| Non-current assets | ||||
| Acquired intellectual property rights | 1,314 | 1,482 | 1,398 | |
| Software intangibles | 41 | 49 | 40 | |
| Development costs | 670 | 369 | 520 | |
| Property, plant and equipment | 4,941 | 2,914 | 3,199 | |
| Deferred tax assets | 1,885 | 1,849 | 2,045 | |
| Investment in joint venture | 1,486 | 1,346 | 1,749 | |
| Loans and receivables | 583 | 674 | 662 | |
| Trade and other receivables | 200 | 200 | 209 | |
| 11,120 | 8,883 | 9,822 | ||
| Current assets | ||||
| Inventories | 2,658 | 1,934 | 2,231 | |
| Trade and other receivables | 4,706 | 4,650 | 4,894 | |
| Investments | 2,915 | 4,817 | 5,730 | |
| Cash and cash equivalents | 1,596 | 846 | 1,882 | |
| 11,875 | 12,247 | 14,737 | ||
| Total assets | 22,995 | 21,130 | 24,559 | |
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | 2,865 | 3,124 | 4,008 | |
| Other taxes payable | 230 | 226 | 308 | |
| Financial liabilities | 17 | 16 | 17 | |
| Obligations under finance leases | 15 | 12 | 14 | |
| 3,127 | 3,378 | 4,347 | ||
| Non-current liabilities | ||||
| Financial liabilities | 253 | 271 | 262 | |
| Obligations under finance leases | 47 | 63 | 58 | |
| 300 | 334 | 320 | ||
| Total liabilities | 3,427 | 3,712 | 4,667 | |
| Net assets | 19,568 | 17,418 | 19,892 | |
| Equity | ||||
| Share capital | 7,219 | 7,166 | 7,169 | |
| Share premium | 59 | 20 | 23 | |
| Share based payments reserve | 387 | 224 | 300 | |
| Investment in own shares | (33) | (18) | (18) | |
| Share based payments deferred tax reserve | 380 | 609 | 571 | |
| Other reserve | 1,531 | 1,531 | 1,531 | |
| Translation reserve | 147 | - | 427 | |
| Retained earnings | 9,878 | 7,886 | 9,889 | |
| Equity attributable to equity holders of the parent | 19,568 | 17,418 | 19,892 | |
CONDENSED CONSOLIDATED Statement of Changes in Equity
Attributable to equity holders of the Group
| Share | Investment | Share based | |||||||
| Share | Share | based | in own | payments | Other | Translation | Retained | ||
| capital | premium | payments | shares | deferred tax | reserve | reserve | earnings | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2009 (audited) | 7,169 | 23 | 300 | (18) | 571 | 1,531 | 427 | 9,889 | 19,892 |
| Share based payments | - | - | 100 | - | (191) | - | - | - | (91) |
| Issue of share capital | 8 | - | - | - | - | - | - | - | 8 |
| Share options exercised | 42 | 36 | (13) | (7) | - | - | - | 13 | 71 |
| Shares purchased by EBT | - | - | - | (110) | - | - | - | - | (110) |
| Shares sold by EBT | - | - | - | 102 | - | - | - | - | 102 |
| Exchange differences on translation of foreign operations | - | - | - | - | - | - | (280) | - | (280) |
| Consolidated loss for the period to 30 June 2009 | - | - | - | - | - | - | - | (24) | (24) |
| At 30 June 2009 (unaudited) | 7,219 | 59 | 387 | (33) | 380 | 1,531 | 147 | 9,878 | 19,568 |
| Share | Investment | Share based | |||||||
| Share | Share | based | in own | payments | Other | Translation | Retained | ||
| capital | premium | payments | shares | deferred tax | reserve | reserve | earnings | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| - | |||||||||
| At 1 January 2008 (audited) | 7,157 | 17 | 154 | (13) | 320 | 1,531 | - | 6,580 | 15,746 |
| Share based payments | - | - | 70 | - | 289 | - | - | - | 359 |
| Issue of share capital | 5 | - | - | - | - | - | - | - | 5 |
| Share options exercised | 4 | 3 | - | - | - | - | - | - | 7 |
| Shares purchased by EBT | - | - | - | (89) | - | - | - | - | (89) |
| Shares sold by EBT | - | - | - | 84 | - | - | - | - | 84 |
| Consolidated profit for the period to 30 June 2008 | - | - | - | - | - | - | - | 1,306 | 1,306 |
| At 30 June 2008 (unaudited) | 7,166 | 20 | 224 | (18) | 609 | 1,531 | - | 7,886 | 17,418 |
CONDENSED CONSOLIDATED Statement of Changes in Equity
Attributable to equity holders of the Group
| Share | Investment | Share based | |||||||
| Share | Share | based | in own | payments | Other | Translation | Retained | ||
| capital | premium | payments | shares | deferred tax | reserve | reserve | earnings | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 1 January 2008 (audited) | 7,157 | 17 | 154 | (13) | 320 | 1,531 | - | 6,580 | 15,746 |
| Share based payments | - | - | 146 | - | 251 | - | - | - | 397 |
| Issue of share capital | 5 | - | - | - | - | - | - | - | 5 |
| Share options exercised | 7 | 6 | - | - | - | - | - | - | 13 |
| Shares purchased by EBT | - | - | - | (89) | - | - | - | - | (89) |
| Shares sold by EBT | - | - | - | 84 | - | - | - | - | 84 |
| Exchange differences on translation of foreign operations | - | - | - | - | - | - | 427 | - | 427 |
| Consolidated profit for the year to 31 December 2008 | - | - | - | - | - | - | - | 3,309 | 3,309 |
| At 31 December 2008 (audited) | 7,169 | 23 | 300 | (18) | 571 | 1,531 | 427 | 9,889 | 19,892 |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
| | (Unaudited) | (Unaudited) | (Audited) |
| | Six months | Six months | |
| | ended | ended | Year ended |
| | 30 June 2009 | 30 June 2008 | 31 December 2008 |
| | £’000 | £’000 | £’000 |
| Cash flows from operating activities | | | |
| (Loss)/profit from operations | (60) | 1,030 | 2,699 |
| Adjustments for: | | | |
| Share of results of joint venture | 68 | - | (80) |
| Depreciation | 226 | 343 | 673 |
| Amortisation - intellectual property rights | 84 | 84 | 168 |
| - development costs | 43 | 92 | 160 |
| - software intangibles | 13 | 11 | 24 |
| Profit on sale of non-current assets | - | (10) | (35) |
| Increase in inventories | (427) | (208) | (505) |
| Decrease/(increase) in trade and other receivables | 197 | (1,073) | (1,613) |
| (Decrease)/increase in trade and other payables | (1,229) | 137 | 1,140 |
| Share based payments expense | 100 | 70 | 146 |
| Net cash (outflow)/inflow from operating activities | (985) | 476 | 2,777 |
| | | | |
| Cash flows from investing activities | | | |
| | | | |
| Proceeds on disposal of property, plant and equipment | - | 25 | 56 |
| Purchase of software | (14) | (15) | (19) |
| Capitalised research and development | (193) | (119) | (343) |
| Purchases of property, plant and equipment | (1,968) | (362) | (894) |
| Movements in investment in money market deposits | 2,815 | 1,837 | 924 |
| Interest received | 21 | 108 | 487 |
| Investment in joint venture | - | (1,346) | (1,376) |
| Movement in loans and receivables | - | (674) | (531) |
| Net cash from /(used in) investing activities | 661 | (546) | (1,696) |
| | | | |
| Cash flows from financing activities | | | |
| Finance lease | (10) | 50 | (17) |
| Repayment of secured loan | (9) | (1) | (29) |
| Issue of equity shares | 79 | 12 | 13 |
| Shares purchased by EBT | (110) | (89) | (89) |
| Shares sold by EBT | 102 | 84 | 84 |
| Interest paid | (14) | (16) | (37) |
| Net cash from/(used in) financing activities | 38 | 40 | (75) |
| Net (decrease)/increase in cash and cash equivalents | (286) | (30) | 1,006 |
| | | | |
| Cash and cash equivalents at the beginning of the period | 1,882 | 876 | 876 |
| | | | |
| Cash and cash equivalents at the end of the period | 1,596 | 846 | 1,882 |
Notes Forming Part of the Condensed Consolidated Financial Statements
1. Reporting Entity
Advanced Medical Solutions Group plc ("the Company") is a public limited company incorporated and domiciled in England and Wales (registration number 2867684). The Company's registered address is Road Three, Winsford Industrial Estate, Winsford, Cheshire CW7 3PD.
The Company's ordinary shares are traded on the AIM market of the London Stock Exchange. The financial statements of the Company for the twelve months ended 31 December 2008 comprise the Company and its subsidiaries and joint venture (together referred to as the "Group").
The Group is primarily involved in the design, development and manufacture of novel high performance polymers (both natural and synthetic), for use in advanced woundcare dressings and materials, and medical adhesives, for closing and sealing tissue, for sale into the global medical device market.
2. Basis of Preparation
The information for the year ended 31 December 2008 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
The individual financial statements for each Group Company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the condensed consolidated financial statements, the results and financial position of each Group Company are expressed in pound sterling, which is the functional currency of the Company, and the presentation currency for the condensed consolidated financial statements.
3. Accounting policies
The same accounting policies, presentations and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, with the exception of the presentation of exceptional items and the adoption of IAS1 (revised). The annual financial statements of Advanced Medical Solutions Group plc are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The unaudited condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Account Standard 34 'Interim Financial Reporting', as adopted by the European Union.
Exceptional items are those items that are unusual because of their size, nature or incidence or that the directors consider should be disclosed separately to enable a full understanding of the Group's results. This includes non-recurring transaction abort costs and site relocation costs (see note 7). Exceptional items have been presented separately on the face of the income statement. The directors consider that this presentation gives a fairer presentation of the results of the Group.
In addition, the Group has adopted IAS1 (revised) 'Presentation of financial statements'. There has been no effect on the presentation or disclosure in the interim financial report.
4. Earnings/(loss) per share
| (Unaudited) | (Unaudited) | (Audited) | |
| Six months | Six months | Year | |
| ended | ended | ended | |
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |
| £'000 | £'000 | £'000 | |
| Earnings for the purposes of basic and diluted earnings per share being net (loss)/profit attributable to equity holders of the parent | (24) | 1,306 | 3,309 |
| Add back exceptional items | 949 | (10) | (35) |
| Earnings prior to exceptional items | 925 | 1,296 | 3,274 |
| Number of shares | '000 | '000 | '000 |
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 143,796 | 143,198 | 143,284 |
| Effect of dilutive potential ordinary shares: | |||
| share options, deferred share bonus, LTIPs | 9,534 | 10,054 | 9,979 |
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 153,330 | 153,252 | 153,263 |
5. Segment information
For management purposes, the Group is organised into two business units, advanced woundcare and wound closure and sealants. These divisions are the basis on which the Group reports its segment information.
Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments, and related revenue, corporate assets, head office expenses and income tax assets.
Business segments
The principal activities of the advanced woundcare business unit are the research, development, manufacture and distribution of novel, high performance polymers for use as wound dressings.
The principal activities of the wound closure and sealants business unit is the research, development, manufacture and distribution of medical adhesives and products for closing and sealing tissue.
Segment information about these businesses is presented below.
| Six months ended 30 June 2009 (unaudited) | Advanced woundcare £'000 | Wound closure & sealants £'000 | Eliminations £'000 | Consolidated £'000 |
| Revenue | ||||
| External sales | 8,011 | 1,867 | - | 9,878 |
| Inter-segment sales | 2 | - | (2) | - |
| Total revenue | 8,013 | 1,867 | (2) | 9,878 |
Inter-segment sales are charged at prevailing market prices.
| Result | ||||
| Segment result | 1,432 | (13) | - | 1,419 |
| Unallocated expenses | (1,479) | |||
| Loss from operations | (60) | |||
| Finance income | 21 | |||
| Finance costs | (14) | |||
| Loss before tax | (53) | |||
| Tax | 29 | |||
| Loss for the period | (24) |
| At 30 June 2009 (unaudited) Other information | Advanced woundcare £'000 | Wound closure & sealants £'000 | Eliminations £'000 | Consolidated £'000 | ||||
| Capital additions: | ||||||||
| Software intangibles | 7 | 7 | - | 14 | ||||
| Research & development | 186 | 7 | - | 193 | ||||
| Property, plant and equipment | 1,867 | 101 | - | 1,968 | ||||
| Depreciation and amortisation | 200 | 166 | - | 366 | ||||
| Balance sheet | ||||||||
| Assets | ||||||||
| Segment assets | 12,248 | 4,715 | - | 16,963 | ||||
| Unallocated assets | 6,032 | |||||||
| Consolidated total assets | 22,995 | |||||||
| Liabilities | ||||||||
| Segment liabilities | 2,338 | 1,012 | - | 3,350 | ||||
| Unallocated liabilities | 77 | |||||||
| Consolidated total liabilities | 3,427 | |||||||
Included in the advanced woundcare segment are assets of £1,486,000 and results of £(68,000) in respect of Corpura BV, the Group's joint venture.
5. Segment information continued
| Six months ended 30 June 2008 (unaudited) | Advanced woundcare £'000 | Wound closure & sealants £'000 | Eliminations £'000 | Consolidated £'000 |
| Revenue | ||||
| External sales | 8,037 | 1,807 | - | 9,844 |
| Inter-segment sales | 20 | - | (20) | - |
| Total revenue | 8,057 | 1,807 | (20) | 9,844 |
Inter-segment sales are charged at prevailing market prices.
| Result | ||||
| Segment result | 1,296 | (53) | - | 1,243 |
| Unallocated expenses | (213) | |||
| Profit from operations | 1,030 | |||
| Finance income | 181 | |||
| Finance costs | (16) | |||
| Profit before tax | 1,195 | |||
| Tax | 111 | |||
| Profit for the period | 1,306 |
| Wound | ||||
| At 30 June 2008 (unaudited) | Advanced | closure & | ||
| woundcare | sealants | Eliminations | Consolidated | |
| Other information | £'000 | £'000 | £'000 | £'000 |
| Capital additions: | ||||
| Software intangibles | 11 | 4 | - | 15 |
| Research & development | 97 | 22 | - | 119 |
| Property, plant and equipment | 232 | 130 | - | 362 |
| Depreciation and amortisation | 381 | 149 | - | 530 |
| Balance sheet | ||||
| Assets | ||||
| Segment assets | 12,582 | 4,344 | - | 16,926 |
| Unallocated assets | 4,204 | |||
| Consolidated total assets | 21,130 | |||
| Liabilities | ||||
| Segment liabilities | 2,488 | 1,003 | - | 3,491 |
| Unallocated liabilities | 221 | |||
| Consolidated total liabilities | 3,712 |
Included in the advanced woundcare segment are assets of £2,020,000 and a result of £nil in respect of Corpura BV, the Group's joint venture.
5. Segment information continued
| Year ended 31 December 2008 (audited) | Advanced woundcare £'000 | Wound closure & sealants £'000 | Eliminations £'000 | Consolidated £'000 |
| Revenue | ||||
| External sales | 16,415 | 3,901 | - | 20,316 |
| Inter-segment sales | 33 | - | (33) | - |
| Total revenue | 16,448 | 3,901 | (33) | 20,316 |
Inter-segment sales are charged at prevailing market prices.
| Result | ||||
| Segment result | 3,036 | 848 | - | 3,884 |
| Unallocated expenses | (1,185) | |||
| Profit from operations | 2,699 | |||
| Finance income | 265 | |||
| Finance costs | (37) | |||
| Profit before tax | 2,927 | |||
| Tax | 382 | |||
| Profit for the year | 3,309 |
| At 31 December 2008 (audited) | Advanced | Wound closure & | ||
| woundcare | sealants | Eliminations | Consolidated | |
| Other information | £'000 | £'000 | £'000 | £'000 |
| Capital additions; | ||||
| Software intangibles | 15 | 4 | - | 19 |
| Research & development | 294 | 49 | - | 343 |
| Property, plant and equipment | 727 | 251 | - | 978 |
| Depreciation and amortisation | 721 | 304 | - | 1,025 |
| Balance sheet | ||||
| Assets | ||||
| Segment assets | 10,596 | 5,019 | - | 15,615 |
| Unallocated assets | 8,944 | |||
| Consolidated total assets | 24,559 | |||
| Liabilities | ||||
| Segment liabilities | 2,847 | 1,079 | - | 3,926 |
| Unallocated liabilities | 741 | |||
| Consolidated total liabilities | 4,667 |
Included in the advanced woundcare segment are assets of £1,749,000 and a result of £80,000 in respect of Corpura BV, the Group's joint venture.
Geographical segments
The advanced woundcare and wound closure and sealants segments operate mainly in the UK, with a sales office located in the USA. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.
5. Segment information continued
The following table provides an analysis of the group's sales by geographical market, irrespective of the origin of the goods/services based upon location of the Group's customers:
| (Unaudited) | (Unaudited) | (Audited) | |||
| Six months | Six months | ||||
| ended | ended | Year ended | |||
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |||
| £'000 | £'000 | £'000 | |||
| United Kingdom | 2,825 | 3,568 | 7,023 | ||
| Europe excluding United Kingdom | 4,488 | 3,678 | 7,991 | ||
| United States of America | 2,309 | 2,467 | 4,810 | ||
| Rest of World | 256 | 131 | 492 | ||
| 9,878 | 9,844 | 20,316 | |||
All assets are classified as under the United Kingdom due to the immateriality of the carrying value of all assets held in the United States of America.
6. Seasonality of sales
See the Chairman's Statement for further information regarding the phasing of sales between the first and second half of the year.
7 Exceptional items
The Group is in the process of rationalising its two existing sites in Winsford into a new facility. During the six month period ended 30 June 2009 expenditure of £186,000 was incurred in respect of the site move.
On 9 April 2009, the Board announced that it had been pursuing an acquisition opportunity that had reached an advanced stage of discussions but which had now been terminated. The costs incurred in the six month period ended 30 June 2009 in respect of this aborted transaction amounted to £763,000.
During the six months ended 30 June 2008, profit of £10,000 was recognised on disposal of property, plant and equipment.
8. Tax
Tax for the six month period is charged at 28% (six months ended 30 June 2008: 28.5%, year ended 31 December 2008: 28.5%). The effective rate of current tax for the 6 months ended 30 June 2009 was Nil% (six months ended 30 June 2008:Nil%) after the application of losses brought forward and research and development tax relief, with some off-set for disallowable expenditure. The tax credit for the period represents the movement in deferred tax on share-based payments.
No dividends were paid or proposed in the six month period ended 30 June 2009 (six months ended 30 June 2008: Nil, year ended 31 December 2008: Nil).
10. Contingent liabilities
The directors are not aware of any contingent liabilities faced by the group as at 30 June 2009 (31 December 2008:Nil).
11. Share capital
Share capital as at 30 June 2009 amounted to £7,219,000 (31 December 2008:£7,169,000). During the period the Group issued 841,000 shares in respect of exercised options and 162,000 shares in respect of the Deferred Share Bonus Scheme.
12. Going Concern
The Directors have carried out a review of the Group's financial position and cash flow forecasts for the next 12 months. These have been based on a comprehensive review of revenue, expenditure and cash flows, taking into account specific business risks and the current economic environment.
With regard to the Group's financial position, it had cash and cash equivalents at the half year of £1.6 million and investments totaling £2.9 million with a maturity not exceeding three months. The Group also has in place a 3-year Revolving Credit Facility including £1 million overdraft facility for £5 million.
While the current economic environment is uncertain, AMS operates in a market whose demographics are favourable, underpinned by an increasing need for products to treat chronic and acute wounds. Consequently, market growth is predicted. The Group has a number of long-term contracts with customers across different geographic regions and also with substantial financial resources, ranging from government agencies through to global healthcare companies.
Having taken the above into consideration the Directors have reached a conclusion that the Group is well-placed to manage its business risks despite the current uncertain economic outlook. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements.
13. Principal Risks and Uncertainties
In the current economic climate there continues to be a risk that one of the Group's partners or suppliers may be severely affected by the economic recession which will have a negative impact on the Group. In particular, the Group has seen this effect with some of its US partners.
The Group continues to invest in research and development to develop its next generation of products. Not all research is successful or there may be delays in the projects. Either of these may impact cost or delay revenue or income streams.
The rationalisation of the advanced woundcare operations from two sites to one also presents a risk to the Group. Although the Board believe the move has been carefully planned and resourced, there is some risk that the project may over run or be overspent or may not deliver the benefits that are expected. At the half year this project was within budget and on time.
Further detail concerning the principal risks affecting the business activities of the Group are detailed on page 22 of the Annual Report and Accounts for the year ended 31 December 2008.
14. Events after the balance sheet date
There have been no material events subsequent to the end of the interim reporting period ended 30 June 2009.
15. Related party transactions
During the six month period ended 30 June 2009, Group companies entered into the following transactions with related parties who are not members of the Group.
| | Purchase of goods | | ||||
| | (Unaudited) | (Unaudited) | (Audited) | Amounts owed by related parties | ||
| | Six months ended 30 June 2009 | Six months ended 30 June 2008 | Year ended 31 December 2008 | (Unaudited) 30 June 2009 | (Unaudited) 30 June 2008 | (Audited) 31 December 2008 |
| | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| Joint venture | 156 | - | 189 | 583 | 674 | 662 |
Purchases were at arm's length and were made at market price discounted to reflect the quantity of goods purchased. Amounts owed reflect the loan made to the joint venture.
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been received.
16. Copies of the interim results
Copies of the interim results can be obtained from the Group's registered office at Road Three, Winsford Industrial Estate, Winsford, Cheshire CW7 3PD.
INDEPENDENT REVIEW REPORT TO ADVANCED MEDICAL SOLUTIONS GROUP PLC
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009, which comprises the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 3, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory AuditorsManchester, United Kingdom
8 September 2009